Shar's Cars, L.L.C. v. Elde

Facts

Brasher's Auto Auction filed suit against P and others. P answered and filed a third party complaint against Elder (D) and Rutherford (D). Because he failed to file an answer, a default judgment was eventually entered against Rutherford (D). P and his wife obtained a dealer's license to sell cars and created Shar's Cars. Elder (D) and his partner Rutherford (D) were in the business of wholesaling cars. P met Elder (D) and Birschbach (D) and entered into an oral agreement. Elder (D) and Rutherford (D) would use P's dealer's license and continue their business selling cars both retail and wholesale. The Elder/Rutherford partnership would operate separately from P's business, paying its own expenses, and distributing its profits between the two partners. In consideration for the use of the dealer's license, Elder/Rutherford would pay P $100 for every car sold retail, pay the operating expenses of Shar's Cars, and help D learn how to purchase cars at auctions. The parties agreed that the Elder/Rutherford partnership would operate under the name Shar's Cars. Elder (D) managed the dealership and maintained the financial records. In June 1998, P extended a loan to the Elder/Rutherford partnership for $25,000 to be paid back within thirty to sixty days. On August 15, 1998, Elder (D) left the business and ended his partnership with Rutherford (D). Rutherford (D) notified P of the dissolution of the partnership. Shortly thereafter, Rutherford (D) and P met and agreed to carry on the business together. P was told that the Elder/Rutherford partnership was 'down' between $5000 and $10,000. The Elder/Birschbach partnership bank account was closed, and the remaining balance of $29,267.27 was either transferred to P and Rutherford's (D) new business account, or used to pay off partnership debts. The repayment of the $25,000 loan was extended and Rutherford (D) agreed to make monthly payments on the debt. In October 1998, P was contacted by a State investigator concerning cars that were sold without delivering proper title. P then began paying off the debts and clearing titles on the cars that had been sold. He also closed down Shar's Cars. Elder (D) was not involved in the closure of the business or repayment of any of the Elder/Rutherford debts, with one exception. In July 1998, Elder (D), on behalf of the partnership, signed a check for $21,600 to Garff Leasing representing payment for a truck. This check bounced. After notifying P of the bounced check in late November 1998, Garff Leasing agreed to accept repayment from Elder (D) and Rutherford (D). Each signed a note promising to pay one-half of the check amount. Garff Leasing also required P to guarantee the notes. Elder (D) paid his half of the bounced check, but Rutherford (D) did not. Both experts testified that their financial analysis was not complete because the financial records available were not complete. The court found that Elder (D) was not responsible for any liabilities occurring after he left in August 1998. Based on the calculations of Elder's (D) expert, the court found $45,000 in damages and ordered Elder (D) to pay half, totaling $22,500. This appeal resulted. 

Issues

Rule of Law

Holding and Decision

Legal Analysis

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